Washington (CNN) -- The State Department came under sharp criticism Monday over how it hires and monitors thousands of private contractors.

A watchdog panel, the Commission on Wartime Contracting, has questioned whether the State Department is prepared to continue its work in Iraq, and protect American diplomats, once the U.S. military withdraws, now set for the end of this year.

"Our concerns remain very much alive," the commission's co-chairman, Christopher Shays, said in his opening statement.

Shays also focused on what he said was State Department refusal to document its rationale for not taking action against contractors officially recommended for suspension or disbarment.

That response approaches the borderline of government negligence," Shays said.

The sole witness appearing before the panel was a senior State Department official, Under Secretary for Management Patrick Kennedy. He described how the department has increased its oversight of contractors. "We fully understand that we still have challenges ahead as we carry out our diplomatic missions in Iraq, Afghanistan and other locations where we rely on contingency contracting," Kennedy said. "But we believe we have instituted a sound foundation to carry us forward."

Monday's hearing is the latest in a steady drumbeat of criticism of the department's warzone operations. The State Department Inspector General last week reported that for Iraq, "several key decisions have not been made, some plans cannot be finalized and progress is slipping in a number of areas."

The Inspector General report said that security concerns and poor contractor performance are major hindrances to the completion of 5,405 projects valued at more than $15 billion.

And a report from the Commission of Wartime Contracting, released on Friday, said billions of dollars of training programs and public works projects -- funded by American taxpayers -- could be wasted in both Iraq and Afghanistan because the host governments don't have the trained staff or money to sustain them when the U.S. departs.

A key question raised in the hearing is whether private security contractors can provide adequate protection to U.S. diplomats in Iraq now handled by the U.S. military.

Kennedy said the Pentagon would provide the State Department with more than $200 million of equipment, including 60 mine-resistant, ambush-protected vehicles (MRAPs).

But the State Department will not have so-called counter-battery weapons systems that hone in on where firing is coming from and automatically fires back.

Shays said at no other time have American diplomats been asked to work in such dangerous circumstances. "Host governments cannot provide effective, customary security, there are no front lines and large terrorist organizations are trying to kill our people and anyone who works with them," Shays said.